Unlocking Value

Other than paying dividends, China Merchants China Direct Investments (133 HK, “CMCDI”) can return capital to shareholders through a share buyback offer, at a price close to net asset value (NAV) per share.

This is a common strategy for closed-end funds to narrow their discount to NAV.  HSBC China Dragon Fund (820 HK) has done that many times (after ASM’s active engagement with HSBC).  BlackRock has recently announced that it will do the same.

In fact, CMCDI did a share buyback offer in 2013.

In 2013, CMCDI offered to buy back 7,917,171 shares (~5% of its outstanding shares) at HK$ 20.94 per share, which was approximately 10% discount to the unaudited net asset value per share back then (31 March 2013).  The offer price was almost double the share price immediately before the announcement.

The board said that the buyback exercise was:

in the interests of both [CMCDI] and the Shareholders to return part of the surplus fund…by way of the Offer.

The board also named four good reasons (which we paraphrase):

• Enhance NAV and earnings per share
• Let shareholders (who wish to exit) realize part of their investments at premium over market share price without incurring brokerage commission and other costs
• Let shareholders (who wish to stay) increase their proportionate interest in CMCDI with higher NAV per share
• An offer is a fair way for shareholders to participate equally

Shareholders supported the buyback offer overwhelmingly.  At an extraordinary general meeting, 99.98% present-and-voting shares were in favor of the buyback.

The buyback offer was wildly popular among shareholders.  It turns out that ~59% outstanding shares accepted the offer (including China Merchants Finance Holdings, the largest shareholder, and its affiliates), which was ~12 times the size of the offer.

It is time for CMCDI to do the same again.

Visit us:  UnlockValueChinaMerchants.com

Write to us:  ChinaMerchants@asmhk.com

除了支付股息外，招商局中国基金（“中国基金”，股票代号：133 HK）可以按照接近每股净资产价值（NAV）的价格回购股份，以向股东返还资本。

这是封闭式基金缩小其折价幅度的常见策略。汇丰中国翔龙基金（”汇丰基金“，820 HK）在ASM积极参与后曾多次采取类似的行动。BlackRock最近也宣布将采取同样的措施。

实际上，中国基金在2013年完成过一次股份回购。

2013年，中国基金以每股20.94港元的价格要约回购了7,917,171股股份（约占其5%的股份），回购价格相对于其当时（2013年3月31日）每股净资产价值（NAV）折价约10%，几乎是其回购公告发布前股价的两倍。

董事会表示，回购行动“透過要約將部分剩餘資金退還合資格股東亦符合本公司及股東之利益”。董事会列举了四个充分的理由，我们重述如下：

• 增加每股股份综合资产净值及每股股份盈利；
• 让有意变现的股东按较目前股份市价有溢价之变现机会，而且不用承担于公开市场出售股份时通常须支付之经纪佣金和其他费用；
• 为有意维持股权及参与未来发展之股东提供机会，在要约完成后相应增加其占中国基金之权益比例，并且归属于所持每股股份之资产净值及每股股份之未来盈利有所增加；
• 使得全体股东公平参与透过全面要约方式进行的股份回购。

股东们也对回购方案给予了极大支持。在特别股东大会上，99.98%出席并投票的股东赞成回购计划。

股份回购方案在股东中广受欢迎。事实证明，约59%的流通股份接受了回购方案（包括最大股东招商局金融集团及其关联方），这是计划回购规模的12倍。

现在是中国基金再次采取同样行动的时候了。

访问我们:  unlockValueChinaMerchants.com

电邮我们:  ChinaMerchants@asmhk.com